Brexit and Euratom – The Issues and Consequences

Prime Minister Theresa May’s letter invoking the use of Article 50 of the Lisbon Treaty confirmed that, as well as withdrawing from the European Union (the “EU”), Brexit also will involve the UK withdrawing from certain key pan-EU initiatives, including the European Atomic Community (“Euratom”). The UK’s membership of Euratom is governed by the Treaty Establishing the European Atomic Community 1957 (the “Euratom Treaty”). Euratom, whilst a separate legal entity from the EU is governed by the EU’s institutions, including the European Commission and the European Court of Justice. In addition, the Euratom Treaty cross-references to the Treaty on the European Union (the “TEU”), as well as the Treaty on the Functioning of the European Union (the “TFEU”), through references made in Article 106a of the Euratom Treaty to various articles in the TEU and the TFEU.1 Consequently, the EU and Euratom are very much closely intertwined with each other, and the UK’s withdrawal from the EU would seem to necessitate the simultaneous withdrawal from Euratom.

The UK currently relies heavily on Euratom, Euratom’s officials, and the Euratom Treaty for, amongst other things, its regulatory regime, safety standards, and privity to various crucial international agreements on nuclear technology. These safeguards and standards are pre-requisites for international nuclear trade and research collaboration.

In addition to the above, the Euratom Treaty also establishes, inter alia, the free movement of nuclear sector specialists and associated investment capital across the Euratom Community (i.e. the Member States of the EU), and provides for funding of extensive research development programmes.

Issues on Euratom Brexit

The UK’s withdrawal notice under the Euratom Treaty begs the question as to the potential ramifications and necessary measures required to address the UK’s withdrawal from its membership of Euratom.

1. Replacing Resources and Framework

As aforementioned, the UK is heavily reliant on Euratom, its resources (e.g. research materials, supply contracts. funding, etc.), and officials, to perform a variety of crucial activities for the continued operation of related infrastructures and nuclear trade and activity. Given that the UK has already implemented effective regulatory standards in respect of nuclear trade (albeit substantially derived from the Euratom Treaty and EU legislation), it has been stated that an exit from Euratom would not mean that the UK will become “any less safe or any less [compliant] with any overarching international agreement, because the Euratom agreements are driven by the [International Atomic Energy Agency (“IAEA”)]”.2

The key issue lies in the need to replace the current Euratom-owned physical infrastructure, equipment, skilled personnel, processes and regulatory and legal framework. This raises a multitude of legal issues including, but not limited to, employment, intellectual property rights, service agreements, compliance with the UK’s nuclear non-proliferation safeguards commitment, and the decommissioning of radioactive waste.

2. Nuclear Material (Trade and Supply)

Article 52(1) of the Euratom Treaty establishes the common supply policy for nuclear fuel, based on the principle of equal access to sources of supply. To implement this common supply policy, the Euratom Treaty establishes the Euratom Supply Agency (“ESA”). Pursuant to Articles 52 to 76 of the Euratom Treaty, the ESA has various rights, including: (i) an option on all nuclear material produced in the territories of Member States,3 and (ii) an exclusive right to “conclude” supply contracts of nuclear material irrespective of its source.4

In relation to the ESA’s option on all nuclear material produced within Member States, including the UK, it is unclear as to the extent to which the ESA has previously exercised, or waived its option to such material, and precisely what types of material are covered by this option (e.g. nuclear fuel or wastes). Nevertheless, the question of ownership is another issue that needs to be resolved prior to the UK’s exit from Euratom.

In relation to the ESA’s right to “conclude” such contracts, the parties, upon agreeing and signing the contract, are obliged to submit the contract to the ESA for its approval. Thereafter, the ESA becomes a signatory to the contract, and any assignment, termination or amendments to the contract will require the ESA’s approval.

Depending on the agreement reached with the IAEA and/or Euratom, an exit from Euratom would likely result in less bureaucratic overview by Euratom over any future supply agreements into the UK. That said, it has been argued that Euratom’s involvement in negotiating contracts gives the Euratom Community more bargaining power in the negotiations with third countries. Consequently, the UK may simultaneously lose this advantage, by, in itself, becoming a third country.

As the UK relies on both the nuclear cooperation agreements held by the Euratom Community and third countries (such as the US and Japan), and the Nuclear Common Market,5 before any nuclear materials can be moved across any countries’ borders, the UK will need to negotiate new agreements (and associated safeguards arrangements). Failure to implement such satisfactory arrangements would have a varying degree of impact on the supply of nuclear related material, including electricity generation in UK nuclear plants (which currently generates approximately 20% of UK’s electricity supply), the parts and nuclear materials required to build and/or maintain existing and new nuclear reactors (including Hinkley Point), and radioactive treatment in hospitals.

3. Research and Current Projects

Another key concern flowing from the UK’s departure from Euratom is the likelihood that the UK would be excluded from vital Euratom research programmes. In a report published on 25 April 2017 by the House of Commons Business, Energy and Industrial Strategy Committee (the “BEIS Report”), it noted that this could have further consequences, such as:

In addition to the above, a notable consequence would be a disruption to the UK hosting the £2bn Joint European Torus project (also known as the JET project) at Culham. Currently, the UK contributes approximately €45m to the EU’s fusion programme a year and the EU budgets to the UK €45m a year to run the JET facility, and another €7m to support the research there. The JET project is currently the world’s biggest fusion experiment – a joint venture used by more than 40 EU laboratories and involving approximately 350 scientists. This project aims to create nuclear power by fusing atomic nuclei (as opposed to splitting them) and eventually pave the way for affordable commercial reactors. The impending departure from Euratom has reportedly caused concern for the scientists at the JET facility, some of whom have left the project in light of the uncertainty.

Moving forward

Commentators have suggested that there are three possible ways forward:

Completely exiting from Euratom;

UK attaining third country status (such as China and Russia); or

UK remaining in Euratom as an associated country (as is Switzerland).

Notwithstanding the above, it is common consensus that any new arrangements for regulating nuclear trade and activity will take longer than the two-year Brexit negotiation window. Consequently, the BEIS Report recommends that the UK Government should seek to delay its exit from Euratom to ensure that new satisfactory arrangements can be implemented beforehand.

Such an approach would require the UK to continue paying Euratom to provide the safeguarding services, albeit on a temporary basis. The UK currently contributes to Euratom’s budget indirectly through its contribution to the EU budget. Thereafter, Euratom’s budget is determined and supported by the European Commission. However, given how reliant Euratom is on the European Commission and the European Court of Justice, it is questionable how this would work given the current imperatives of Brexit.

Irrespective of the approach taken, it is clear that in the short term, a greater degree of clarity on the impending future of the UK nuclear industry and energy sector is needed, so as to minimise any disruption.

Further, under the European Union (Amendment) Act 2008, all references to “EU” within UK legislation also includes “Euratom”.

Dame Sue Ion, Chair of the former Nuclear Innovation and Research Advisory Board.

Article 52(2)(b) of the Euratom Treaty states: “… an Agency is hereby established; it shall have the right of option on ores, source materials and special fissile materials produced in the territories of Member States and an exclusive right to conclude contracts relating to the supply of ores, source materials and special fissile materials coming from inside the Community or from outside.”

Ibid.

This provides for rights for the transport of nuclear materials, goods and personnel within the Euratom Community.